For Walmart U.S. in recent years, its chief competition has been Amazon, which has been crushing e-commerce grocery sales as it rolls out Amazon Fresh. But increasingly, it’s been focused on a German grocer, the Aldi retail brand, which has been opening stores and aggressively marketing to woo away price-conscious consumers.
Aldi, already breathing down Walmart’s neck, also plans to get even more aggressive with a “billion-dollar plan to lower prices, redesign existing stores and expand its footprint,” Business Insider reports.
In addition to running ads, social marketing, an award-winning store brand and a tie-in with Top Chef alum Carla Hall, Aldi will open 400 new U.S. stores by the end of next year for a national footprint of about 2,000 locations. It’s also remodeling existing stores in key markets such as Chicago and Detroit.
Adding to Walmart’s woes, another German discount grocery chain in Lidl plans to open 20 U.S. stores in the mid-Atlantic region starting in June, with 100 American locations over the next year.
As Consumerist notes, “Lidl’s U.S. stores will be around 20,000 square feet, while a typical Aldi store has 10,000 square feet of sales floor. Stores will have only six aisles and display some merchandise on islands, making them easy to navigate.”
Just as they’ve done with keeping Tesco on its toes in the UK, Aldi and Lidl are tag-teaming (if not cooperatively) to challenge Walmart on its home turf.
The German grocers are making inroads just as the American megaretailer has stabilized its bricks-and-mortar stores and is shoring up its e-commerce offering, but it’s still locked in an expensive, toe-to-toe battle with Amazon. Walmart is also engaged in a battle with the dozens of CPG brands it’s squeezing in order to keep down prices and invest in its brand, own products and operations.
Aldi’s internal studies show its prices are still 21 percent lower than its lowest rivals, including Walmart, according to Reuters, which also took a look at how Walmart is dropping prices to undercut Aldi on key grocery items:
Aldi CEO Jason Hart plans to add more private-label good to win over price-sensitive consumers, to spend $1.6 billion to remodel and expand 1,300 stores, and open the 400 new stores mainly in Florida, Texas and both coasts by the end of 2018, Business Insider said.
Hart also says Aldi will change prices more nimbly to respond to Walmart and other competitors as needed.
“We are re-merchandising, remodeling, enhancing our product range and are focused on gaining volume so more customers start their shopping at Aldi, and we are able to complete their shopping lists more so than we have in the past,” Hart told the publication.
At this point Aldi, through its mainly modest-sized stores, accounts for only about 1.5 percent of the US grocery market, while Walmart controls about 22 percent. But Aldi is growing at about 15 percent a year whereas Walmart’s sales are estimated to be growing by only about 2 percent a year.
Walmart is fighting back on all fronts with a renewed push to cut prices and expand conveniences such as click-and-pick-up, but that will shave the brand’s profits in the already-low-margin grocery business.
Just like the Amazon-Walmart war, the Aldi-Walmart-and-now-Lidl clash will put even more pressure on a battered retail sector that is already dealing with a wave of bankruptcies and store closings.
Aldi isn’t just putting competitors on notice in the U.S., by the way — check out its new brand positioning campaign in Australia below: